The Independent Bankers Bank' in Springfield, Ill., is getting into the long-distance phone business, putting itself in direct competition with the state's community bank trade group.

Though the two organizations have been close since the bankers' bank's founding 10 years ago - in fact, Community Bankers Association of Illinois executive director Robert J. Wingert was a founding director of the bank - the bankers' bank wasn't talking last week when the trade group called for information about the new service.

"They were wondering if this was a better program, and we said we would not have offered it if it weren't," said Diane McCluskey, vice president at the Independent Bankers' Bank.

Bankers' banks were designed to be folksy, high-service alternatives for community banks who were tired of using the large, city banks as their correspondents. But, as the Illinois case shows, these banks are offering new services to generate more fee income, even if it means competing with trade groups.

"Admittedly, we've struggled with the idea of two groups competing with each other, but in the end if that competition helps the small banks prosper, then so be it," said Mr. Wingert.

The trade group, which has been offering long distance telephone service to its members for more than three years, said that if it deems that the bankers' bank's new service - in partnership with MCI Communications Corp. - is better than its own, it will seek similar terms through its own provider, Consolidated Communications.

"We don't want to promote a program that's inferior in the marketplace," said Michael W. Kelley, executive manager of the trade group's service affiliate. "We've asked for some information from the bankers' bank, and we'll just have to push a little harder to determine that information."

The two organizations are hesitant to call each other competitors (the bankers' bank is a member of the trade group), but with recent forays by trade groups and, particularly, bankers' banks into new product areas, a clash in the marketplace was inevitable.

The Independent Bankers' Bank, which has 400 owner/customers, said it has received inquiries about its new M&I service from 40 of them.

In its summer quarterly newsletter, the bank reported that the program saved between 28% and 40% on phone rates in three test cases, and touted it as offering cutting-edge technologies such as paging, business software, and Internet access.

"It's definitely not a traditional correspondent bank service, that is true," said Ms. McCluskey. "But in this case we felt this product was a superior cost-savings opportunity."

MCI and the Independent Bankers Bank were brought together by Resource BancManagement, a bank consulting firm in Jacksonville, Fla., which is currently working with some of the country's other 16 bankers' banks on the idea. The Community Bankers' Bank in Richmond, Va., also signed up with MCI and began offering the service in August.

Helge S. Christensen, chief executive of the Bankers' Bank in Madison, Wis., said though his bank has branched into nontraditional areas such as 401(k) plans and mutual funds in recent years, he rejected the MCI program.

"Our state trade association offers a similar program, and we just felt its not a banking service but an association product," he said. "We are not telephone people, and we don't want to be in the telephone business."

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